Saturday, January 18, 2014

MAFATLAL INDUSTRIES LTD - BUY



  


  
Even though we turned as parents or grandparents , how many of us can forget our old school days. For many of us ,the first entry into school by hanging on the finger tips  of our father ,our old teachers , our loved school mates  ..etc are still part of  of our sweet nostalgia. The special smell of new text book and new uniform is always part of our fond memories. At that time we were not bothered about brands of anything .But even if you are  at 100 now ,uniform brand you used in those days may be the same one your grand children using now  - MAFATLAL .

                                                               'Mafatlal' is a brand need no introduction to Indians. Mafatlal Industries Ltd (MIL)  started operations in early 1900's  and still this brand is a synonym for quality fabrics. Company is the supplier of corporate uniforms for well known firms like Toyota ,HP ,Intel..etc. It is not only producing uniform textiles but is an integrated player manufacturing Shirtings, Suitings, Voiles, Prints, Linens, Bleached White Fabrics, value added and fashion Denims, Corduroys, Bed & Bath Linen and Readymades in Cotton, Linen, Polyester/ Cotton, Polyester/Viscose, Cotton/Lycra, PV/Lycra, Terry Rayon and Polyester wool blends...etc . Ready made men's wear is  selling under the brand 'TRENDZ' .Even if this company still keeping the quality of its products ,its financial performance was not so bright for many years. Old machinery,out dated technology,excess work force ,lack of focused approach by the management ..etc derailed the operations of the company .Company ended in deep trouble  mainly due to its mounting debt burden and later referred to BIFR in 2002.Even management tried to revamp their company in the past they could not succeed due to many reasons.The real turning point came in the form of monetizing its 7 acre land at Mumbai for Rs.605 Cr in 2011.Ever since they realized this amount ,management started many steps to bring back the company into past glory.

                                                          Company paid back substantial portion of its debt and this once debt ridden company’s debt equity ratio now brings down to just 0.25 .During last year ,an amount of Rs.43 cr spend for installing State-of-the-art machines in place of out dated machines.This helps the company substantially to  reduce the workforce and it reduce the strength of workers by 37% .More than 1100 employees removed from pay roll by offering VRS in last year.In order to reduce power cost ,company is now setting up a 3MW co-generation plant which will be operational within 3 months from now. In last year MIL merged two companies – Mafatlal Denim and Mishapar investments -with itself. Company spend Rs.25 Cr in last year to expand this denim production facility at Navsari and now it is running at 100% capacity utilisation.Mafatlal Denim supplying its products to renowned brands like Wrangler ,Lee,Mark & Spencer..etc and also selling under own brand. With the merger of this denim facility ,MIL become a one stop shop for all textile needs having presence in the entire value chain which extents from spinning, weaving, dyeing, processing to finishing.Management’s efforts to revamp the company not only limited to  production side but many new initiatives introduced in marketing part too.Many new products introduced during last year including home furnishing items,linen fabrics..etc.Company is now in the process of expanding the number of its retail outlets (Mafatlal Familiy Shops ) from the current 100 to 150. In addition to family shops ,its products are currently available through 400 dealers and 35000 (Thirty Five Thousand) approved retailers across India. MIL also exporting products to various countries and reported a jump of more than 100% in exports during last year over previous year. As a result of all these efforts ,Company’s overall financial performance started to improve from FY 2012-13 .After a gap of many years company reported sharp improvement in sales and profitability in last year.Click on the below image for comparative data .
 
  
* FY 2012 figures for 9 months only

If the better performance in 2013  included an other income component ( Out of this Rs.15 cr is interest income from bank deposits) MIL reported  its good numbers  in the first half of this FY  even after deducting such items.( Some seasonality is  there in the sales of MIL  due to uniform sales ). Stability in cotton price due to good monsoon is also expected to help the company to protect their margin in the coming year.

I believe the brand ‘Mafatlal’  having very good brand recall  and now promoters are taking every efforts to renovate the company and exploit the potential of this brand.Actually they are working one by one and already turned around their another company Navin Flourine.Another point to note is ,management is very liberal in dividend distribution. After a long gap of many years MIL declared a dividend of 50 % ( 30 % + 20 % special dividend) in last year ,as soon as they returned to profitability. Other group company – Navin Flourine- distributed a dividend of Rs.75 ( not 75 %) in last year. Mafatlal Industries is one of the very few companies which is integrated by all means (from spinning to own shops)  .Company  is now ready for a second innings  and it is the time to buy this stock for long term . MIL listed  only in BSE (CODE :500264) @ CMP is  Rs.148

  
 


Link to Company's new website HERE 







Disc : I have vested interest in MIL

63 comments :

  1. Value pick sir,
    Bharat Jayantilal Patel holds some shares in this. Also one Acira Consultancy holds. Any idea who are these?

    ReplyDelete
    Replies
    1. I think Bharat Jayantilal Patel is the same person who is the Chairman and major share holder of Rubfila International Limited

      Delete
  2. Dear VPji,

    Thanks for your detail study & recomm.

    Jitendra

    ReplyDelete
  3. Sir the stock has shown falling profitability for last 3 quarters. Is this due to seasonal impact or some other factor?
    Also, is there any change in senior management that is driving this change?

    ReplyDelete
  4. Not in 3 quarters but in 2 compared with March Quarter . Yes,some seasonality in sales is there ,March quarter is always the best for company .

    Entire management team changed in 2013 including Chairman ,Vice Chairman ,MD and CEO.

    ReplyDelete
  5. Sir,
    Your view on Himatsingka Seidge as its in Textile sector and exporting most of their products..

    Sir are you bullish on the Textile sector as a whole.
    thnx

    ReplyDelete
    Replies
    1. Not tracking the stock.Not positive on all cos from this sector ,but selected companies with good brands.

      Delete
  6. Sir,
    holding small no of Raymond.

    Any views on it if you positive for long term in Raymonds too.

    ReplyDelete
  7. Sir what is your view upon skumar nationwide is it now buy at cmp

    ReplyDelete
  8. Sir,
    Any change in view after BASF recently declared quarterly results. Market seems not taking results positively and stock is going down. Would appreciate your update on view. I am holding 500 shares at average of around 640.
    Thanks for your response.

    ReplyDelete
    Replies
    1. No change,BASF is not a company to change view only on the basis of a quarterly result.It is a stock to keep in core portfolio.

      Delete
  9. Dear Sir,

    Awesome explanation about the company. I really appreciate the hardwork you put in to all your recommendations that makes every detail about the company so clear to investors like thus. Kudos to you. Sir please recommed some shares like this thats trading below 50/- and is worth investing for small investors like us.

    Keep up the good work sir. God bless you

    Regards
    Rajeev

    ReplyDelete
    Replies
    1. Rajeev why we need to stick on price.In demat mode ,can't we buy a single share.?

      Delete
  10. Value Pick Sir - Is Orient Bell Still a long term HOLD ?
    Hope you have not given any SELL call due to its previous quarter results
    Please advice

    ReplyDelete
    Replies
    1. Arun

      If my memory is correct once recommended to book loss ,but it was only for investors having no patience to hold the stock for long term.

      Delete
    2. Thanks , Have enough patience to hold for long term

      Delete
  11. Dear VP,

    Can you please provide your views on Bajaj Corp.?
    Regards,
    Pratul

    ReplyDelete
    Replies
    1. Raw material cost is increasing ,which may affect its margins in next few quarters.

      Delete
  12. My main concern on Mafatlal group was promoters and their shareholder unfriendly attitude, do you think that has changed?

    ReplyDelete
    Replies
    1. I don't think they are unfriendly to share holders ,but laziness and mismanagement was there in the past .There is lot of change visible in recent years .Navin Flourine's successful turn around is also a testimony for that.

      Delete
  13. Dear Sir,

    Can I buy Eicher Motors for 2 years

    ReplyDelete
  14. What is meant by Q1,2,3,4?.Please explain it.because I am new comer

    ReplyDelete
    Replies
    1. Dear anannd

      Definition of 'Quarter - Q1, Q2, Q3, Q4'

      A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends. A quarter refers to one-fourth of a year and is typically expressed as "Q." The four quarters that make up the year are: January, February and March (Q1); April, May and June (Q2); July, August and September (Q3); and October, November and December (Q4). A quarter is often shown with its relevant year, as in Q1 2012 or Q1/12, which represents the first quarter of the year 2012.

      Delete
    2. Thank khanna and value pick

      Delete
  15. Dear VP
    Some of your recomendation like Royal Orchid Hotel,Technofab Eng,Kilburn Chemicals,Chowksi Imaging not shows a flavour path....please advice will these still be a performer...

    ReplyDelete
    Replies
    1. Dear

      Don't think stock will move forever only on my recommendation.If a stock is deeply under valued based on the fundamentals at the time of recommendations ,such stocks will move up quickly and reach a certain level where valuation justifies the fundamentals at that time. From there on ,growth of the company will start to play .In some cases growth did not happened as expected .As you are aware the last three years were very tough for global as well as Indian corporates.Situation of small and medium cos was even worse .So some of recommendations ends in red .But the point is ,such cases not happened due to any specific issues to that particular company like fraud of management ..etc but only due to overall negative business environment of the industry in which that company is operating .

      As an investor ,what you can do is . Track the company and industry you bought periodically ,at least at the time of qtr results ,read the annual reports ..etc and take a decision.If you have no plan to hold for long term ,don't show any hesitation to book loss if you are not comfortable with working performance of company in short term due over all bad performance of the whole industry.

      For long term investors -- Every industry is cyclical and cycles will turn around .Keep patience and concentrate to study whether the management is doing any fraud or so .If everything -expect bad time of industry- is ok HOLD it tightly .It will reward in long term.

      Don't think Investor's duty will end with the buying of a stock ,but actually it starts from there.Lot of people thinking one should spend full time in front of trading terminals to become a successful investor .I request you to spend ,at least one third of the time now you are spending to watch price movement ,to study about the company,its business,management ,industry ..etc.For an investor trading terminal is only for executing the order ,let traders sit there full time.

      Delete
    2. Very informative answer sir .Once again, thank you so much for your time, expertise and patience!

      Delete
  16. Sir,
    How is Navin Flourine,is the same new management running it,it has also run up after the special dividend which you have mentioned, is maftlal out of pca.

    ReplyDelete
  17. Not strictly tracking the business cycle of Navin.Yes Mafatlal is now out pf Periodic Call Auction.

    ReplyDelete
  18. Dear Sir
    Hope you will find time to reply to this query. Could you please let me know your view on TTL? As you always say, I raise quieries after studying a lot with the knowledge I have. Then i always seek your advice to take a final call. In otherwords a small positive sign from your end helps me to make a call since rest of the points I take from company site.But you have at times get info from Management too which we don't have. Hence bother you to have your valuable time for us. TTL's technology in collaboration with GE help to to stamp a foot print in the turbine biz. Neverthless pls advice. Thank you as always. Sulekha

    ReplyDelete
    Replies
    1. Triveni Turbine is not a bad stock but at present industry is not in a good shape ,so order intake is bit slow. It will perform once there is revival in the sector ,Company having export too ,so global changes also help the company.Go for it if and only if you have enough patience.

      Delete
  19. Respected Sir,

    If you see the latest holdings of dolly khanna you would find that she has sold all her stake in liberty shoes.Is it true?Do you think that Liberty has lost its charm.Well i personally feel that it is a very good stock to hold for long term and can be next bata in the making.But after this news I need you expert opinion as We all trust you a lot...Do you think that It can be a wealth creator for us.

    Thanks in advamce

    ReplyDelete
    Replies
    1. I think,before posting any messages, readers have responsibility to ensure the accuracy of facts and refrain from spreading rumors .In fact , Dolly Khanna increased stake from 173758 shares to 278827 shares in Liberty Shoes in the latest December quarter and this data available in BSE website itself.

      Delete
    2. Dear Sir,

      I have seen the details given by you are correct that Dolly Khanna has increased the stake. I have one question that Liberty Shoes has not served its Equity by way of Paying Dividend. Still what are the reasons that you are recommending it.

      Delete
    3. Liberty was a consistent dividend payer till 2005 and issued even a 1:1 bonus in that year.After that its business slowed down and company skipped dividend.I expect the same will resume in near future.One more point is ,there is no meaning in distributing huge dividend if the company having opportunities to expand further which need capex

      Delete
  20. Sir,
    whats your view on Panacea Biotech and do you expected a turnaround by March 2014?

    ReplyDelete
  21. Dear VP ji,
    After a long time, I have seen your last week pick "Apar Ind." has not done much compared to your earlier pick (only one day it was high and other full week ended in red). Any specific reason in your opinion?. Also, Do you think at CMP Liberty is good buy as the results seems in line buy profit booking has shares to 143. What is your opinion? I want to enter. So please advise. Thank you.

    ReplyDelete
    Replies
    1. Dear Friend

      I can only express my opinion based on the current working and my expectations about a particular company .No ability to manipulate share price upto a certain level to claim my success.Price movement always depends on supply demand equations .

      Delete
  22. Sir,
    First of all a Very Happy New Year to your and your Family.

    I would like to know your view on two stocks:

    1.RS Software which is into a niche space called e-payment.If you see the shareholding pattern you would find that some FII's and dolly khanna both are increasing their stake QoQ.What is your view on this stock.

    2.Second Stock is TATA Elxsi from the renowned TATA Grp which is a niche player in the technical design segment. It offers embedded product design and industrial design solutions. It also provides animation and visual effects services and systems integration.

    Please let me know whether these stocks can be bought in at CMP and what is the future of these stocks.

    Please do reply as your opinion matters a lot for all the retail investors like us.

    ReplyDelete
    Replies
    1. I agree with you that the space in which RS Software operating have good potential .But the major issue with the company is the promoters itself frequently buying and selling their shares,means they are trading in the shares of their own company. So I take their published numbers with a pinch of salt .I am not saying they are manipulating their numbers , they are frauds,or the share price will not move up or so , but I have no confidence to recommend this stock to my readers till the management give a convincing explanation for their action.

      Not tracking Tata Elxi

      Delete
    2. Dear ValuesPick,

      I started reading your blogs recently. Not sure if you are tracking INDORAMA. Can you let me know your view on NSE: INDORAMA ? Can I enter at Current Levels?

      Delete
  23. dear vp,

    I have been seeing this trend in your recommendations, the time you recommend, it starts moving up from the previous month and the time you recommend for next one month it remains moving up and then boom it comes down. Is there any paid services that you recommend to people and yourself invest before recommending :??

    ReplyDelete
  24. My stand on this subject explained at least five times in the past .

    I have no paid service and if I have one why I need to hide the same from public ?

    If I feel a stock is good and I have funds to buy it ,surely I will buy it before recommending .I don't think anyone will do the opposite - first recommending openly and then buying ,but I will try my level best to adhere the SEBI rule on front running.

    ReplyDelete
    Replies
    1. Appreciate the honest reply Valuepick!

      Delete
    2. I also appreciate the honesty and integrity in this and various of your other replies and BELIEVE in it too.

      Delete
  25. Sir, are you following godrej consumer products stock.. Could u please tell if its a good company 2 invest..
    I have done some research myself and found out these
    POSITIVES
    1)Growing at 15-20% in terms of sales and profit YOY
    2)Has presence in under-penetrated sector like HOUSEHOLD INSECTICIDES and HAIR COLOUR
    3)Present in emerging markets (INDONESIA,LATIN AMERICA,AFRICA)
    NEGATIVES
    1)PE Ratio o 36

    ReplyDelete
    Replies
    1. Good stock to keep in portfolio.enter at an appropriate price in a correction.

      Delete
  26. Dear Vp i have started earning in stock market only after I started following your valuable blogs, thanks for such a good work.Sir, what's your expert view on wiezmann forex as promoter is continuously increasing his stake.After the recent substantial acquisition of shares stands to app 86%. Is the script future delisting candidate.Plz reply..

    ReplyDelete
  27. This is honest disclosure and everyone from this site should agree to it.

    Dear Sir,

    Further please provide your opinion on NOCIL, which is also very good company from Mafatlal group and have consistent track record of Dividend. Dividend yield is more than 4%. Mkt rate is 70% of Historical Book Value. Promoters have got all their shares unpleged after Dec 2012. There may be other advantages also.

    What is you view on this stock.

    ReplyDelete
    Replies
    1. Company making rubber chemicals.User industry is not in a good shape at present .Recently started new plant .Suitable for very long term investors.

      Delete
  28. Hello VP Sir,

    I have a question.. I hear from lot of people that Persistent systems is into the niche business & it has got placed better than the other big players in the same sector.. Their business growth & profitability are expected to be far better than the other IT majors.. Considering all this can we accumulate the stock at CMP or at corrections?

    Regards,
    Saravanan

    ReplyDelete
  29. Persistent Recommended @ Rs.430 .Link Below

    http://value-picks.blogspot.in/2011/01/persistent-systems-buy.html

    At CMP Rs.1000 ,it already appreciated more than 100 % ,now it is a HOLD for me.

    ReplyDelete
  30. Reading your blog for quite some time. A new investor, who likes to stay invested for longer periods.
    Invested in Mafatlal. You recommended at 148, I bought it at 160. Currently it is at 123.
    Now, I am not blaming you at all. Perhaps the stock will recover in the coming months and I am not in a hurry.

    But how come there is no discussion about Mafatlal on the comments section after January 20th? Not many people bought it after you recommended?

    ReplyDelete
    Replies
    1. If my memory is correct ,somebody asked about it post result and I replied below the post of Granules Result update on 29th

      Delete
  31. Hi
    Any change in recommendation here? Currently trading at 115.

    Thanks!

    ReplyDelete
  32. After around 6/7 months of the recommendations , Maftlal is trading around the same level(it had appreciated though 20/30 percent . Do you think one can consider buying the stock at present valuation ??

    ReplyDelete
    Replies
    1. From where one get 30 % return legally in 6-7 months ?

      Delete

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